Twitter, Grappling with Anemic Growth, Tries to Bolster Its Advertising Business

SAN FRANCISCO — This week brought a stark reminder of what can happen to internet businesses that are overtaken by rivals: Yahoo, an iconic web company that lost out to Facebook and Google, agreed to sell its core internet operations to Verizon for a fraction of its peak value.

It’s a description that is also applicable to Twitter.

The social media company’s peers — Facebook, WhatsApp and Messenger — are now the stars, growing rapidly and performing well. Snapchat, the disappearing photo start-up, is loved by the cool kids. And LinkedIn, the strait-laced so-called professional network, was part of an enormous deal when Microsoft agreed to buy it last month for $26.2 billion.

Not so for Twitter. For months, the San Francisco-based company has been grappling with worsening advertising growth and anemic audience growth. It risks losing out on top talent and deals to other bigger, stronger companies.

On Tuesday, Twitter’s ailing position among its peers was underscored once more when the company reported its worst quarterly revenue growth ever and only a slight increase in users for the second quarter. The company also signaled that its prospects were unlikely to improve in the short term.

Twitter posted revenue of $602 million for the quarter, up 20 percent from a year ago and below Wall Street estimates of $607 million. Its net loss narrowed to $107 million, or 15 cents a share. Twitter’s users grew 3 percent from a year ago, to 313 million.

Looking ahead, the company projected revenue of $590 million to $610 million for the current quarter, far below analyst estimates of $681 million.

Still, Jack Dorsey, Twitter’s chief executive, struck an upbeat note.

“As C.E.O., I’ve seen a lot of the benefit of our focus and execution over the past year,” he said in a conference call with investors on Tuesday.

At the heart of the problem is that the 10-year-old company is still struggling with how to make its product appealing to an audience on a larger scale. Part of the challenge has been direct comparisons to Facebook, which lures more than 1.65 billion monthly visitors to its site.

For a time, Twitter was able to sidestep concerns about its ability to add new users because of the strength of its advertising business; revenue was growing in the high double-digit figures.

That has changed. Over the last six months, Twitter has experienced slower growth in advertiser demand, spooking investors and causing its stock to plummet.

Twitter’s inability to attract new users caught up to it, analysts said, causing a stagnation in advertiser demand. As Twitter is less able to increase the size of its user base, advertisers are more likely to buy ads on Facebook, which has a huge global reach, or perhaps Snapchat, which caters largely to younger audiences.

“It all goes back to the company focusing on building a ubiquitous product and failing to deliver on that promise,” said Brian Wieser, an analyst at Pivotal Research Group.

To turn itself around, Twitter has bet on live streaming video. The company has struck agreements with the National Football League, Bloomberg and the Democratic and Republican National Conventions, among others, to live stream events. Twitter will also try to sell more costly ads — namely video ads, which carry a much higher premium — to its existing advertiser base.

“We’ve become a video-centric platform,” Adam Bain, Twitter’s chief operating officer, said in the company’s conference call on Tuesday. “It is now the No. 1 ad format in terms of revenue on Twitter.”

The company is also working on bolstering what is called direct response advertising, which prompts users to take an action like downloading a mobile app or signing up for a newsletter. The effectiveness of those ads, Twitter said, is easier to measure, which could provide repeat business. While such ads are currently a small portion of the company’s overall advertising revenue, Twitter hopes to increase it over time, said Anthony Noto, Twitter’s chief financial officer.

“We’re focused now on what matters most, and what we need to fix,” Mr. Dorsey said.

A version of this article appears in print on , on Page B2 of the New York edition with the headline: Twitter, Faced With Anemic Growth, Bets on Live Streams and Advertising. Order Reprints | Today’s Paper | Subscribe